Following the Night of the Long Knives, the mid-1934 Nazi purge of its paramilitarySturmabteilung, Dodd changed her views on the Nazis. People in her social circle were begging the Americans for help and the Dodd family found its phones tapped and their servants enlisted as spies.[10] Her mother wrote that Dodd "got into a nervous state that almost bordered on the hysterical [and] had terrible nightmares".[6] In March 1934, the Soviet NKVD Center ordered intelligence officer Boris Winogradov (under diplomatic cover in Berlin as press attache), to recruit his lover Martha Dodd as an agent.[11] Vinogradov and Dodd began a romantic relationship that lasted for years, even after he left Berlin; in 1936 they asked Joseph Stalin for permission to marry.[12][13] Martha Dodd agreed to spy for the Soviet Union.[14] Other case officers soon replaced Vinogradov and Dodd worked with each of them while hoping to reconnect with Winogradov.[11] (Winogradov was executed in approximately 1938, during the Great Purge.[15]) Dodd informed the Soviets of secret embassy and State Department business and provided details of her father's reports to the State Department.[14] As part of her cover, she maintained a romantic relationship with Louis Ferdinand, grandson of the last Kaiser.[16] Anticipating her father's retirement from his Berlin post, she tried to learn the Soviet's preferred replacement for him as U.S. Ambassador and told the NKVD leadership that "If this man has at least a slight chance, I will persuade my father to promote his candidacy."[17] After the Dodds left Germany in December, 1937,[18]Iskhak Akhmerov, NKVD rezident in New York City, managed her espionage work.[19]

In the summer of 1938, while still romantically involved with the filmmaker Sidney Kaufman, with whom she lived for several months,[20] Martha married New York millionaire Alfred Stern, an investment broker[21] who acquired great wealth in a prior divorce from the daughter of Sears Roebuck tycoon Julius Rosenwald.[22] According to Dodd, Stern was prepared to contribute $50,000 to the Democratic party to secure an ambassadorship.[23] The Soviets viewed her as a valuable but uncertain asset. One assessment was: "A gifted, clever and educated woman, she requires constant control over her behavior."[24] Another assessment was that "She considers herself a Communist and claims to accept the party's program. In reality [she] is a typical representative of American bohemia, a sexually decayed woman ready to sleep with any handsome man."[24] In a February 5, 1942, letter, Dodd told her Soviet contacts that her husband should be brought into their network. With their approval, she approached her husband and reported that he responded with enthusiasm: "He wanted to do something immediately. He felt he had many contacts that could be valuable in this sort of work."[25] Stern established a music publishing house that served as a cover for routing information from the U.S. to the Soviet Union.[26][27] Dodd and Stern proved of little value to the Soviets beyond providing the publishing house cover and occasionally recommending someone as a potential agent.[28] As part of the Soble spy ring, Miss Dodd (code named Liza) recommended Jane Foster to infiltrate the OSS.[29]

In 1939, Dodd published a memoir of her years in Berlin, Through Embassy Eyes. It included extravagant praise of the Soviet Union based in her travels there.[28] With her brother as co-editor, she published her father's Berlin diaries, Ambassador Dodd's Diary, 1933-1938.[28]

Her 1945 novel, Sowing the Wind, described the moral deterioration of decent Germans under Hitler. It was "not much esteemed as a work of fiction,"[5] but became a best-seller in translation in the Russian sector of Berlin in 1949.[30]

The FBI had Dodd under surveillance by 1948.[31] Contacts between Dodd and Stern and the NKGB, successor to the NKVD, lapsed in 1949.[32] In 1955, Dodd published The Searching Light, a defense of academic freedom that told the story of a professor under pressure to sign a loyalty oath.[5] In July 1956, subpoenaed to testify in several espionage cases, they fled to Prague via Mexico with their nine-year-old son.[32][33] They later applied for and were denied Soviet citizenship.[34]Boris Morros, a Soviet spy turned FBI informant, implicated Dodd and Stern in 1957 as Soviet agents as part of his exposure of the Soble spy network. The Soviets then allowed them to immigrate to Moscow just as they were convicted of espionage by a U.S. court.[34]

A KGB document, dated October 1975, noted that the Sterns spent 1963–70 in Cuba.[35] In the 1970s, apparently disappointed with their lives in the Soviet Union, they tried without success to have their American attorney negotiate their return to the U.S. The KGB monitored the negotiations and had no objections, since their knowledge of espionage activities was outdated or had been revealed by Morros.[35]